Optimum growth conditions for the fermentation of non-concentrated whey permeate by K. fragilis NRRL 665 were defined. Use of 3.75 g yeast extract l-1, a growth temperature of 38.degree. C and a pH of 4.0 allowed a maximum productivity of 5.23 g ethanol l-1 h-1 in continuous culture with a yield 91% of theoretical. Complete batch fermentation of permeate with 100 g lactose l-1 was possible with a maximum specific growth rate of 0.276 h-1 without any change in ethanol yield. Fermentation of concentrated permeate resulted in a general decrease of specific substrate consumption rate, demonstrated by the inability to completely convert an initial 90 or 150 g lactose l-1 in continuous culture, even at dilution rates as low as 0.05 and 0.08 h-1, respectively. The decrease could be related to substrate inhibition, to an increase in osmotic pressure caused by lactose and salts and to ethanol inhibition of alcohol and biomass yield. The decrease in specific productivity could be counterbalanced by use of high cell density cultures, obtained by cell recycle of K. fragilis. Fermentation of a non-concentrated permeate at a dilution rate of 1 h-1 resulted in a productivity of 22 g l-1 h-1 at 22 g ethanol l-1. Cell recycle using flocculating K. lactis NCYC 571 was also tested. With this strain a productivity of 9.3 g l-1 h-1 at 45 g product l-1 was attained at a dilution rate of 0.2 h-1, with an initial lactose concentration of 95 g l-1.